Poor in India Starve as Politicians Steal $14.5 Billion of Food

By Mehul Srivastava and Andrew MacAskill -
Aug 28, 2012

Ram Kishen, 52, half-blind and half- starved, holds in his gnarled hands the reason for his hunger: a tattered card entitling him to subsidized rations that now serves as a symbol of India’s biggest food heist.

Kishen has had nothing from the village shop for 15 months. Yet 20 minutes’ drive from Satnapur, past bone-dry fields and tiny hamlets where children with distended bellies play, a government storage facility five football fields long bulges with wheat and rice. By law, those 57,000 tons of food are meant for Kishen and the 105 other households in Satnapur with ration books. They’re meant for some of the 350 million families living below India’s poverty line of 50 cents a day.

Instead, as much as $14.5 billion in food was looted by corrupt politicians and their criminal syndicates over the past decade in Kishen’s home state of Uttar Pradesh alone, according to data compiled by Bloomberg. The theft blunted the country’s only weapon against widespread starvation -- a five-decade-old public distribution system that has failed to deliver record harvests to the plates of India’s hungriest.

“This is the most mean-spirited, ruthlessly executed corruption because it hits the poorest and most vulnerable in society,” said Naresh Saxena, who, as a commissioner to the nation’s Supreme Court, monitors hunger-based programs across the country. “What I find even more shocking is the lack of willingness in trying to stop it.”

Unpunished

This scam, like many others involving politicians in India, remains unpunished. A state police force beholden to corrupt lawmakers, an underfunded federal anti-graft agency and a sluggish court system have resulted in five overlapping investigations over seven years -- and zero convictions.

India has run the world’s largest public food distribution system for the poor since the failure of two successive monsoons led to the creation of the Food Corporation of India in 1965. The government last year spent a record $13 billion buying and storing commodities such as wheat and rice, and expects that figure to grow this year.

Yet 21 percent of all adults and almost half of India’s children under 5 years old are still malnourished. About 900 million Indians already eat less than government-recommended minimums. As local food prices climbed more than 70 percent over the past five years, dependence on subsidies has grown.

From the government warehouses, millions of tons are dispatched monthly to states including Uttar Pradesh, which are supposed to distribute them at subsidized prices to the poor. About 10 percent of India’s food rots or is lost before it can be distributed, while some 3 million tons of wheat in buffer stocks is more than two years old, according to the government.

Food Gap

Even after accounting for the wastage, only 41 percent of the food set aside for feeding the poor reached households nationwide in 2005, according to a World Bank study commissioned by the government and released last year.

In Uttar Pradesh, where the minister of food stands charged with attempted murder, kidnapping, armed robbery and electoral fraud, the diversion was more than 80 percent in 2005, the World Bank report said.

Fully 100 percent of the food meant for the poor in Kishen’s home district was stolen during a three-year period, according to India’s Central Bureau of Investigation, the country’s leading anti-corruption agency.

Hunger is worse in villages than in cities. Indians living in rural areas on average eat 2,020 calories a day, against a global average of 2,800 and 11 percent less than they did in 1973, according to government and United Nations’ data.

‘Buzz Off’

When Kishen and other residents of Satnapur sought their monthly quotas at the village’s Fair Price Shop, as the ration stores are called, they’d either find a locked door or be told to return the following month, said Javeed Ahmad, the CBI officer leading the agency’s investigation of the scam for more than three years.

“Who is a person who holds a below poverty line ration card? A person of no influence,” he said. “If he shows up at the Fair Price Shop and there is no below poverty line wheat, you can just tell him to buzz off.”

The scam itself was simple. So much so, that by 2007 corrupt politicians and officials in at least 30 of Uttar Pradesh’s 71 districts had learned to copy it, according to an affidavit filed as part of a probe ordered by the high court in Allahabad, one of the biggest cities in India’s most-populous state. All they had to do was pay the government the subsidized rates for the food. Then instead of selling it on to villagers at the lower prices, they sold to traders at market rates.

Big Daddy

The first person to figure out how to run the theft on a mass scale was a man named Om Prakash Gupta, the CBI’s Ahmad said.

“Gupta was definitely the big daddy of the scam,” said Ahmad. “Over time, every district came up with more efficient executions of this system.”

Gupta was a six-time member of the Uttar Pradesh legislative assembly and the owner of a family run grain-trading firm. By the time he ran for national parliament in 2009, he had been charged with 69 criminal offenses, including five murders, two armed robberies and gangsterism, according to a declaration he filed with the Election Commission of India.

In June 2011 the CBI also charged him with forging documents and other offenses in connection with food theft from the ration program. Gupta, who lost the parliamentary race, died of a heart attack in April at the age of 69 before a trial could begin on the food case. He wasn’t convicted of any other crime.

Only Warrant

So far, he is the only senior political figure to have been arrested by the CBI over the food scam: Ahmad got a warrant after Gupta manhandled one of his investigators.

The CBI’s indictment of Gupta provides a glimpse of how the operation was run. Food purchased by the central government is trucked to districts like Sitapur, where Kishen’s home of Satnapur is located, and stored until marketing managers in the food distribution system sign off on its dispatch to the Fair Price Shops.

The owners of those shops, called kothedars in Hindi, bring cashier’s checks for the subsidized price of the supplies. A kilogram of rice, for instance, costs as little as 2 rupees, or about 3.6 cents, in most states. The market price for similar quality rice is about 10 times higher.

The shop owners are supposed to sell the food to villagers without making a profit.

Gupta got around the system in Sitapur by using a dummy firm called Naimish Oil Industries Ltd., according to the CBI’s indictment. It paid for subsidized rice, wheat and sugar from the warehouses, picking them up in Gupta-owned trucks, scooters and motorized rickshaws, then sold the food to private companies, according to the CBI.

Money Transfers

Gupta and his family pocketed the difference by transferring the money from Naimish Oil’s accounts to their own, according to the indictment.

“While the government is getting real money, the foodgrains don’t actually go to the Fair Price Shops,” said Ahmad.

In one transaction investigated by the CBI, Gupta sold 17.7 million kilograms of wheat to four different companies hundreds of kilometers away in the cities of Kolkata and Raipur. The companies paid $2.1 million to Naimish Oil.

Over a three-year period, 110.6 million kilograms of wheat and rice meant for India’s poor was transferred from rail stations in Sitapur district to Bangladesh, according to the CBI’s indictment. In other transactions, the companies buying the grain were in Nepal, said Ahmad, the CBI investigator.

“Since they were paying tax, paying freight to the railways and actually delivering the promised foodgrains, nobody asked the question of where they procured them originally,” he said.

Groaning Stockpiles

While the food theft by Gupta and his copycats around the state may have robbed people like Kishen of their dinner, it hasn’t put a dent in India’s stockpiles.

Deadly famines were a recurrent feature of life in India until the country embarked on the so-called “green revolution” in the 1960s, experimenting with high-yielding strains, irrigation and pesticides. The nation finally achieved self- sufficiency in food production in the late 1970s.

At the same time, the government began building up buffer stocks of food. While the Food Corporation of India is required to keep about 32 million metric tons of rice and wheat, bumper harvests have left the country with a stockpile of more than 80 million tons, according to the corporation. Stacked in 50- kilogram sacks, the food would reach from Sitapur to the moon, with at least 270,000 bags to spare.

To stop food rotting, the central government lifted a four- year ban on exports of wheat last year. In June, India donated 250,000 tons of wheat to Afghanistan.

Starkly Visible

The nation’s food surplus is starkly visible at the state storage facility about 10 kilometers (6.3 miles) from Kishen’s village of Satnapur.

On June 28, 60 trucks loaded with bags of grain waited outside the walled-off piece of land, one of four similar stockpiling sites in the district. Inside, 40,000 tons of wheat and 17,000 tons of rice spilled out from a small warehouse and were stacked in the open in three-story-high piles, the blue tarpaulin covers tied tight with rope.

The trucks will be parked up for weeks before there is space inside so they can unload.

In Satnapur itself, the prominent ribs and bloated bellies of children playing in the streets give the telltale sign of chronic malnourishment. The village has no electricity, and the local ration shop has been closed for months, residents said.

Of the 106 village households that qualify for subsidized rice, wheat, sugar and kerosene used as cooking fuel, only about half are receiving it, said Surbala Vaish, 40, an activist with the local farmers and workers’ collective, known as Sangathin.

Urmila, a widow who guessed she was in her sixties and lives in a household of five, shows her ration card; it’s been 18 months since she last received her allotment.

A different government card recognizes her status as a widow, meaning she qualifies for rice and wheat for close to free. She’s had the card for six years and has never received her entitlement.

“If you can buy a Pepsi in every village in India, why can’t the government get us our rations?” asked Vaish, who lives in Satnapur. “The reason we don’t is because the government doesn’t want us to -- they all get a cut.”

The proprietor of the local ration shop is a frail, old man called Mattre. Like Urmila and many other Indians, he goes by one name. An illiterate cow-herder, he said he was granted the shop because he is blind. Instead of running it himself, he says he receives $3.50 a day from the village chief, who then takes care of the day-to-day operations.

‘Not My Fault’

“It’s in my name, but someone else runs the shop,” said Mattre, standing outside his straw-and-mud hut. “If the headman isn’t giving people their food, it’s his fault, not mine.”

The village head, actually a woman named Kumari Poonam Yadav, couldn’t be reached. A person who answered a cell phone number that villagers said was hers said he didn’t know anyone by that name.

In Sitapur town, an hour’s drive from the village, Anoop Gupta steps out of a white Toyota Fortuner SUV. He is Om Prakash Gupta’s son, and by the time his father died in April, he had won Om Prakash’s old seat in the state legislative assembly.

Toyota SUV

As Gupta, 42, walks away from the SUV, which retails for $37,500 according to Toyota Motor Corp. (7203)’s website, armed police officers push away the crowd of people rushing to touch his feet, a sign of respect. He walks across a courtyard to a small office behind a gas station, sits at a bare desk, shoos off his entourage and gives a spirited, one-hour defense of his father.

Gupta himself hasn’t been charged with any wrongdoing, although the CBI lists bank accounts in his name through which his family allegedly received money.

“Let me ask you this: If I had, or my father had, or my family had been stealing food from the poor in Sitapur, would they re-elect me?” he said. “I swear upon my dead father that this is a vendetta the CBI has against us. If I ever once stole a grain of rice from a poor man, it would be like eating the flesh of a cow.”

Cows are considered holy in Hinduism and eating beef is forbidden. While Gupta declined to discuss the details of the indictment, he said that his family might have mistakenly paid lower taxes on the transactions. His father and the family firm were simply procuring wheat and rice on the open market in Sitapur and selling to traders around the country, he said.

Just a Trader

“How am I supposed to tell if the wheat or the rice or the sugar in the local market is meant for a ration shop?” he asked. “I am a trader. I buy and sell thousands of tons of food a month.”

Over the past seven years, different court orders and changing state governments have resulted in at least three agencies being tasked with probing the theft: the CBI, a Special Investigative Team of the Uttar Pradesh police and the Economic Offenses Wing of the central government. In addition to the Special Investigative Team, both the state police’s Food Cell, and its Criminal Investigations Division are carrying out probes. Some of the investigations overlap; others run independently.

The CBI, for instance, is only looking at cases where food actually left the state, while the Special Investigative Team is looking at all the cases and the EOW is focused primarily on the money trail.

Cobbled Together

In the state capital Lucknow, CBI officer Ahmad, 52, said the inquiry he heads is the largest he has undertaken. His group of 22 investigators and a few researchers operates out of a run- down, three-story colonial building neighboring a hairdresser and a grocer. Ahmad’s team, cobbled together by a 2008 government order that allowed him to poach 14 officers from around the state, is only authorized to look at the period between 2004 and 2007 and the investigative area is limited to six districts because of a lack of manpower.

Ahmad said he will wrap up his inquiry by the end of the year, and he thought it unlikely he would charge any more senior politicians.

“As a layman, you would say that there must be a big man on top, but can I prove it?” he said. “Even if there is a top gun, I won’t get legally tenable evidence.”

Massive Scale

While Ahmad’s investigation is aided by the simplicity of the food heist, it is impeded by its sheer size. He estimated that in its heyday, the scam involved 5,000 daily transactions spread across 500 square kilometers, involving thousands of individuals and hundreds of bank accounts.

In December 2007, the then-Home Secretary of Uttar Pradesh, Mahesh Gupta, created the Special Investigative Team. Based in Lucknow, it was given a vast mandate: to investigate the “large-scale scams in different schemes of the public distribution system in different districts.”

The period under investigation, though, was limited to between March 2004 and October 2005.

The team’s head, Assistant Director General of the Criminal Investigation Department Rajeev Rai Bhatnagar, spends one day a week at the job. The rest of his time is spent on other assignments, including the CID’s separate investigation.

He said in a June 20 interview in his office, not far from Ahmad’s, that he interprets his mandate only to find and arrest people involved in food theft during that window of time. The brief doesn’t extend to shutting down any current schemes, he said.

‘Not My Concern’

“Is the scam still ongoing? It may be,” said Bhatnagar. “But that is not my concern.” The team has about 300 open investigations and no prosecutions, he said.

A. L. Banerjee, an additional director general of the third investigative body, the Economic Offenses Wing, works from a government building in Lucknow where vagrants sleep on stairways and piles of garbage buzz with flies. He declined to comment when visited by a Bloomberg reporter.

In filings made to the High Court of Allahabad in 2010, the EOW said that while it was continuing to investigate the scam in seven districts, it didn’t have the manpower to extend the probe to a statewide level. It asked the court to help it source cars, computers, printers, photocopiers, fax machines and accommodation for its officers.

Tracking all three investigations is Vishwanath Chaturvedi, 47. A trade union leader with a law degree, Chaturvedi has filed public-interest lawsuits in various courts exhorting the judiciary to prod the three agencies into working faster and more efficiently, and to push for prosecutions that would put senior politicians in jail.

Lawsuits

Chaturvedi filed the first lawsuit asking the government to investigate the stolen food in Sitapur in late 2005, then followed up by persuading the Allahabad High Court to extend the investigation to neighboring districts and to demand regular status reports from all three agencies. He later appealed to the Delhi High Court to monitor the investigation regularly, and has also filed petitions in front of the Supreme Court of India.

Still, he said in an interview that he doesn’t believe these investigations will snag any senior politicians.

“None of these agencies have the manpower, the willpower, or even the political support needed to investigate a theft of this size, this nature and this breadth,” he said, sitting in the living room of his house in New Delhi. Visitors must pass by a police checkpoint on the road and an armed officer at the front door after Chaturvedi received anonymous threats.

He often gets his tips and information from food activists in Uttar Pradesh and his own contacts in the trade unions. He then enters it into court testimony in the CBI’s investigation.

Whistleblower

On December 18, 2011, he walked into the offices of the CBI with a man named Rajiv Yadav. Yadav told investigators he could provide the first link between the scam and the man known as Raja Bhaiya -- Uttar Pradesh’s food minister.

Raja Bhaiya, which roughly translates from Hindi as “our older brother, the king,” has cases pending against him for attempted murder, kidnapping, armed robbery and electoral fraud under his formal name, Raghuraj Pratap Singh, according to his declaration to the election commission. He hasn’t yet been charged with any involvement in the food scam and has denied the other allegations in public speeches.

In Pratapgarh, the district Raja Bhaiya represents, signboards line the highway congratulating him for his latest electoral victory, in March. On the signboards, he wears his hair short, with tinted eyeglasses and a white, collared shirt. He doesn’t smile.

Second Stint

This is his second time as food minister. During his previous tenure, from 2004 to 2007, the food scam spread from Sitapur district to all around the state, the CBI’s Ahmad said.

Yadav has turned over evidence about Raja Bhaiya to the CBI and given sworn testimony to the Delhi High Court, according to court documents.

Yadav said in an interview that he had worked for Raja Bhaiya as a public-relations officer, a fact confirmed by a state directory of officials from that period, his pay slips and a state identity card seen by Bloomberg News. He said he also had informal duties: to collect various sums of money from government officials involved in the scam, to record them in a ledger and to hand them to Raja Bhaiya or his wife.

All the details also appear in Yadav’s sworn testimony to the court. A copy of the hand-written ledger is included as part of the affidavit.

Short, Mustachioed

Short and mustachioed, Yadav now lives in hiding in New Delhi. He said he grew up near Raja Bhaiya’s house in a town named Kunda and was involved in local politics with him. In 2004, when Raja Bhaiya was appointed minister for food, he brought Yadav, 40, along.

Yadav said that between 2004 and 2007 it was his responsibility to collect about $200,000 a week from senior local officials. They were giving Raja Bhaiya his cut from what Yadav was told was the food scam.

The ledger lists dates, names and amounts. In some cases, it only lists a person’s official job title. In one instance, it lists an entire government bureau, the Weights and Measurements Department.

The cash would arrive in suitcases and thick envelopes. After counting the money, Yadav would pass it to Raja Bhaiya’s wife, Bhanvi Kumari, at their home on the edge of Lucknow. To protect himself against any accusation of skimming cash, he said he kept a listing in the ledger of how much was collected and the date, which Kumari would countersign. She hasn’t been charged with any offense.

Not Available

Raja Bhaiya’s office declined to make him or his wife available for an interview. Yashvant Singh, a member of the local assembly who helps handle Raja Bhaiya’s press relations, asked Bloomberg News reporters to come to Lucknow on June 29 for an interview with the minister. The reporters waited for six hours in Raja Bhaiya’s office on June 29 and then were asked to leave. Attempts to interview the minister on a second visit to Lucknow on Aug. 9 were unsuccessful.

The ledger is being held by the CBI as evidence, and a copy was given to Bloomberg News. It shows that Raja Bhaiya’s wife received approximately $20 million over a 1 1/2-year period between 2005 and 2007, according to Yadav’s notations.

Yadav said he had other diaries and ledgers, which he hasn’t shown to the CBI or others. They show additional sums of money being transferred -- as much as $18 million over a three- year period, he said. He called the books an insurance policy against being killed.

Never Scared

“I never for one moment felt scared that I would get caught,” said Yadav, wearing a blue-and-white polo shirt during an interview in which he rarely uncrossed his arms. “If I hadn’t come forward, no one would ever have known this was happening.”

He earned Raja Bhaiya’s trust by running with the gang in their home district, and being involved in two murders and three attempted murders, he said, changing the subject when asked for details. He hasn’t been convicted of any crime.

In 2010, as the CBI’s investigation gathered steam, Yadav said he felt guilty for his part in the scam. He contacted Chaturvedi, who guided him to the CBI.

“I feel less guilty now that I have come forward,” said Yadav. “I feel more at peace with myself.”

According to Chaturvedi, Yadav’s defection may have a less noble explanation: he feared for his life after a physical altercation with Raja Bhaiya. He had already seen Raja Bhaiya shoot a man in the hand, Yadav said in the interview, adding that beatings of staff members were routine in Raja Bhaiya’s entourage.

‘A Psychopath’

“He was a psychopath,” Yadav said. “He felt really happy seeing people cry.” He denied a falling-out with Raja Bhaiya.

Yadav’s statements couldn’t be independently confirmed. Because the ledger has been turned in to the CBI and the Delhi High Court as part of a sworn affidavit, Yadav would be guilty of perjury if his statements were false. Ahmad, the CBI investigator, said he took the ledger seriously, but hadn’t had enough time to investigate it in its entirety.

“Anybody can write anything in a diary. Yadav is acting out of a vendetta,” Raja Bhaiya’s then-spokesman Gyanendra Singh told Indian news magazine Tehelka, which first reported the existence of Yadav’s ledger in April.

Since the fraud has yet to be fully investigated, the amount of food that was stolen from Uttar Pradesh’s public distribution system may be larger than shown in Yadav’s evidence and the CBI and court investigations. Only six districts have been probed, according to the CBI, out of 71 then in the state. Those investigations focused on a specific band of time -- four years at the most, in the case of the CBI.

$14.5 Billion

Chaturvedi, the activist lawyer, has argued in court that the total theft may have been as much as $18 billion. The courts have not refuted the allegation, citing it in orders and judgments during regular monitoring of the CBI investigation.

In Gonda, the one district for which all three investigative authorities have agreed upon a number, the market value of food diverted was $82 million over a four-year period. Extrapolating over 10 years for the state’s 71 districts at the time, as much $14.5 billion may have been stolen. Uttar Pradesh now has 75 districts.

Back in Satnapur, few of the villagers have heard of the probes. Nor do most realize that they are part of a scam that has run for years, and is still to be completely extinguished.

Instead, they focus their thoughts on the stockpile of food 10 kilometers from their village.

“We dream about robbing it,” said Vaish, the activist, as the men and women around her laughed. “We could just storm the place, and every one of us could get a bag of rice each. Who would stop us?”